When you sell a capital asset, the difference between its cost basis and the selling price results in a capital gain or loss.
- A capital gain is when your asset's sales price exceeds its cost basis (in other words, you made money). Capital gains must be reported on your tax return.
- A capital loss is when you sell the asset for less than its cost basis. Capital losses from investments can be deducted, but not those from personal-use assets, such as your home or personal vehicle.
Your total capital gains for the year minus your total capital losses results in either a net capital gain or a net capital loss.
- Short term capital gains (gains on assets held one year or less) are taxed as ordinary income.
- Long term capital gains (gains on assets held more than one year) are taxed at a more favorable rate than ordinary income.
- Net losses are deductible, but only up to a maximum of $3,000 ($1,500 if married filing separately). Any capital losses you couldn't deduct this year can be carried forward and deducted on future tax returns. This is called a capital loss carryover.
Your long-term gain will be taxed at 0%, 15%, or 20% depending on your income.
If you have a short-term gain it will be taxed as ordinary income using your marginal tax rate. If your cost exceeds your sales price, you have a capital loss. You can deduct up to $3,000 in capital losses from your income.
Capital gains, losses, and 1099-B forms are all entered in the same place:
- Open or continue your return in TurboTax
- Search for investment sales and then select the Jump to link in the search results
- Answer Yes to the question Did you have investment income in 2022?
- If you land on the Your investments and savings screen, select Add investments
- Follow the instructions and we'll calculate the gain or loss from the sale
Your total capital gains for the year minus your total capital losses result in a net gain or a net loss.
You can deduct a net loss of up to $3,000 ($1,500 if married filing separately). Any capital loss you couldn't deduct this year can be carried forward and deducted on future tax returns as a capital loss carryover.
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